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Comptroller: Panetta Directive Pushes Audit Readiness

By Lisa DanielAmerican Forces Press Service

WASHINGTON, April 19, 2012  Defense Secretary Leon E. Panetta’s order last year for the Defense Department to conduct a full budget audit in 2014 is pushing the department at all levels to become audit-ready sooner than it otherwise would have, DOD’s chief financial officer told a Senate subcommittee yesterday.

Panetta took office in July, and in October he ordered that the department be audit-ready by 2014.This is three years ahead of a congressional mandate to have all financial statements audit-ready by 2017, Under Secretary of Defense Robert F. Hale, the DOD comptroller, said during a Senate Armed Services Committee’s readiness subcommittee hearing.

“What’s been key is Secretary Panetta’s personal endorsement and acceleration,” he said. “His endorsement has been a game changer and is opening doors I never expected to open.”

The order has gotten the attention of leaders in all areas of the department to take financial management seriously, Hale said. That attention is a reflection of the secretary’s commitment, he added.

“I brief him periodically in staff meetings and, although he has a lot of things on his mind, he always focuses when I talk to him about financial management,” Hale said of Panetta, who was White House budget director for President Bill Clinton.

The department has started course-based certifications for financial professionals and is increasing audit training of thousands of workers, Hale said.

Several DOD agencies – the Army Corps of Engineers, Defense Finance and Accounting Services, and TRICARE – have had independent audit opinions, and key functional areas such as human resources are helping toward the goal, he said.

Hale acknowledged the department has much work to do to meet the financial readiness goals. “We’ve got to change our business practices – we’re with you there – and we are doing it,” he told the subcommittee.

The Army and Navy chief financial officers testified that they expect their services to meet the audit goals for 2014 and 2017.

The Air Force is at “moderate risk” of missing the 2014 deadline because its enterprise resource planning system – an automated, off-the-shelf software system being fielded throughout the department to handle accounting, pay and financial management – has not been fully implemented, Jamie Morin, the Air Force’s comptroller and assistant secretary for financial Management, said.

The Air Force is “very strongly committed to achieving the accelerated goal” and continues to make progress, Morin said. But, service officials had to change course to try to meet the 2014 directive and are trying to mitigate risks while working with their legacy system, he said.

“We’re leaning forward aggressively on this,” Morin said. “The goals are challenging… and we do continue to assess” the situation.

The secretary’s directive “has been both a blessing and challenge,” Morin said. It has built consensus and a leadership commitment, but also “means we cannot rely on all the [enterprise resource planning systems] we’d depended on in the previous plan.”

Senators said they are concerned the department and services will use manual workarounds as a temporary fix to meet the 2014 goal, which could be expensive and not address long-term needs.

All the service representatives said they will have to use some manual workarounds, but those will not get in the way of their long-term solutions.

“We’re not going to hire an army of auditors to do this manually,” Hale said. “That’s not sustainable, and that’s not our plan.”

Hale compared the process of changing financial management systems, processes and culture to become audit ready to that of turning an aircraft carrier.

“We needed the pressure that was generated from the 2014 deadline,” he added. “We’ve got to get this organization moving and I think this shorter deadline has done it. If there are some modest manual workarounds, so be it. I think we’ll get to the end zone sooner.”